How much does a 1% annual fee cost over 25 years?

By Kaz · Verified 20 August 2026 · How this site checks figures

About $92,000, or 12.1% of the ending balance, against a 0.25% fee on this site's example (calculated 20 August 2026). The example starts at $50,000, adds $10,000 a year for 25 years and assumes a 6% gross annual return: $762,500 at 0.25% against $670,500 at 1.00%.

A charge quoted as a percentage is taken from everything in the account, every year, for as long as the account exists. The disclosure shows a small number and the arithmetic produces a large one, because the two are separated by decades of compounding. This page shows the calculation so it can be redone with a real provider's figure.

Updated 13 October 2026 — figures last checked 20 August 2026

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A 1% annual charge leaves about $92,000 less after 25 years than a 0.25% charge on a $50,000 balance with $10,000 added each year — 12.1% of the pot the lower charge would have produced (calculated 20 August 2026). That figure holds only for a constant 6% gross annual return: the account ends at $762,500 at 0.25% and at $670,500 at 1.00%, and other inputs give other figures.

At or below a disclosed charge of 0.25% a year, the contribution rate moves the result more than the charge does. On the same example, cutting a 0.25% charge to zero adds about $33,500 after 25 years, while paying in $11,000 a year instead of $10,000 at 0.25% adds about $56,000 (this site's arithmetic, 13 October 2026).

Three charge levels, the same money paid in

At a 1.50% charge the gap against 0.25% grows to $146,500 over 25 years (calculated 20 August 2026). Take a $50,000 opening balance, $10,000 a year for 25 years and a 6% gross annual return. The money paid in is identical in all three rows: $250,000 of contributions, $300,000 in total. Only the charge differs.

An illustration, not a forecast and not a typical outcome: a constant 6% gross return, the charge deducted from it each year, and no provider guarantees any return. The three levels are round numbers, not market rates; no official source below publishes an average. Source: this site's arithmetic, using the recurrence below. Calculated 20 August 2026.

The recurrence rebuilds in a spreadsheet. Start with the opening balance; each year add the contribution, then multiply by (1 + gross return − charge); repeat 25 times. At a 6% gross return that multiplier is 1.05 at a 1.00% charge and 1.0575 at a 0.25% one. Changing that one term produces every figure above. The fee calculator runs the recurrence on a real balance and a disclosed charge, across three accounts at once.

Why does a 1% annual charge cost more than a 1% one-off fee?

$500 once. A one-off 1% fee on this example's $50,000 opening balance is $500 — taken once and never again. A 1% annual charge is taken from the whole balance instead, twenty-five times, each from a larger balance. Against a 0.25% annual charge, the recurring 1% costs $92,000 over the 25 years.

Two consequences follow. Duration counts as much as level: the same percentage takes far more over 35 years than over 25. And the loss is not linear — the extra 0.75 points from 0.25% to 1.00% costs 12.1% of the low-charge pot; the extra 1.25 points to 1.50% costs 19.2% (calculated 20 August 2026).

What do the official 1% examples show?

28 percent of the ending balance, over 35 years. The US Department of Labor sets out its version in A Look at 401(k) Plan Fees: "Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000... The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent."

That example assumes 7% average annual returns. At 0.5% in annual fees and expenses the account reaches $227,000; at 1.5% it reaches $163,000. The 28% reduction comes from one percentage point of charge and nothing else (checked 20 August 2026).

The Securities and Exchange Commission gives a second example on a shorter horizon, in the investor bulletin How Fees and Expenses Affect Your Investment Portfolio: $100,000 for 20 years at a 4% annual return, compared at 0.25%, 0.5% and 1% annual fees (checked 20 August 2026). Its ending dollar amounts sit inside a chart image, unreadable from the official page, and stay unconfirmed.

The misreading that costs the most: a percentage is not the whole fee

A single percentage is often treated as the total cost of an account, and it is not. The Department of Labor's participant-level disclosure rule reaches "Participants and beneficiaries with the authority to direct their own investments in individual account plans", and requires "the total annual operating expenses expressed as both a percentage of assets and as a dollar amount for each $1,000 invested... in a chart or similar format designed to facilitate a comparison", plus quarterly statements of the fees "actually charged to or deducted from their individual accounts" (checked 6 September 2026). A flat annual administration fee shows up in the quarterly statement in dollars and never appears in the percentage at all, which is why the two have to be read together before two accounts can be compared.

Where is the real charge written down?

It depends on the country. In the United States, ERISA rule 404(a)(5) puts the percentage and the per-$1,000 figure in front of the participant without asking. ERISA rule 408(b)(2) requires the same direct and indirect compensation to be disclosed before the service arrangement is entered into, but to the plan's fiduciaries rather than the participant, so it has to be requested from the plan administrator.

For the United Kingdom, this site's ledger does not confirm an equivalent participant-level rule, so no document is named here. Ask the scheme administrator in writing for the annual charge on the arrangement the member is in, as a percentage of funds under management and as a cash amount for a full year. Where the money actually goes covers the other deductions.

Does any rule cap what a US plan can charge?

No. The Department of Labor puts it directly in A Look at 401(k) Plan Fees: "Keep in mind that the law requires the fees charged to a 401(k) plan be reasonable rather than setting a specific level of fees that are permissible" (checked 6 September 2026). Somebody under a legal duty must judge the number reasonable; nothing sets a ceiling on it.

The United Kingdom bounds it in one place: default arrangements in qualifying workplace schemes carry a cap of 0.75% a year of funds under management (checked 20 August 2026). What that cap reaches, and what it leaves out, is set out in does the U.S. cap 401(k) fees.

So what do you do

If the disclosed annual charge is at or below 0.25%, the account is at the cheapest row above and the charge is not worth more time. If it is 1.00% or more, run the recurrence on the real balance and contribution, and compare the result with the same run at 0.25%. If it sits between the two, run the recurrence twice — once at the disclosed charge, once at 0.25% — and compare the two ending balances in cash. If the statement gives no percentage, or a percentage plus a separate flat fee, request the 404(a)(5) disclosure or the scheme's annual charge statement first: a comparison made on a partial charge figure is not a comparison.

What to check next

Two documents, in this order. The 404(a)(5) disclosure for the plan, which carries the percentage and the per-$1,000 figure. Then the most recent quarterly statement, which carries the dollar amounts actually deducted, including any flat administration fee the percentage does not contain. The 2026 limits and what changed covers what can go in alongside them.

Frequently asked questions

Is a 1% charge always worse than a 0.25% charge?

Yes on this page's arithmetic, which holds the gross return constant across the three charge levels — 0.25%, 1.00% and 1.50% — the only way to isolate the charge. If two accounts hold different investments, the gap in ending balances reflects charge and returns together, and this calculation cannot separate them.

Does the charge come out of the contribution or the balance?

It depends on the structure, which is why the statement has to be read rather than assumed. The recurrence on this page deducts the charge from the return on the whole balance, which is how a percentage-of-funds charge works. A charge on contributions, or a flat annual fee, behaves differently and is calculated separately.

Why does the Department of Labor's example show 28% and this one 12.1%?

35 years against 25 years, and one percentage point of charge difference against three-quarters of a point. The Department of Labor's example runs from $25,000 at an assumed 7% return, comparing 0.5% with 1.5%. This page runs from $50,000 plus $10,000 a year at 6%, comparing 0.25% with 1.00%.

Sources

• DOL worked example — $25,000 balance, 35 years, 7% assumed returns, 0.5% versus 1.5% fees, $227,000 versus $163,000, a 28 percent reduction; and the quoted statement that the law requires fees to be reasonable rather than setting a permissible level: A Look at 401(k) Plan Fees, US Department of Labor. Checked 6 September 2026.
• SEC worked example setup — $100,000 invested, 20 years, 4% annual return, compared at 0.25%, 0.5% and 1% annual fees. The chart's ending dollar amounts are an image and could not be read from the official page, so they are recorded as unconfirmed and are not quoted: How Fees and Expenses Affect Your Investment Portfolio, US Securities and Exchange Commission. Checked 20 August 2026.
• ERISA 404(a)(5) participant-level fee disclosure, including the percentage-of-assets and per-$1,000 chart and the quarterly statements: Final rule to improve transparency of fees and expenses, US Department of Labor. Checked 20 August 2026.
• The recipients of the 404(a)(5) disclosure — participants and beneficiaries with the authority to direct their own investments in individual account plans — and the 408(b)(2) service-provider duty: Reporting and Disclosure Guide for Employee Benefit Plans, US Department of Labor. Checked 6 September 2026.
• UK 0.75% a year charge cap on default arrangements in qualifying workplace schemes: Cost and charge restrictions, The Pensions Regulator. Checked 20 August 2026.
• Ending balances of $762,500, $670,500 and $616,000, the gaps of $92,000 and $146,500 and the 12.1% and 19.2% figures are this site's own arithmetic, produced by the recurrence stated in the text from a $50,000 starting balance, $10,000 annual contributions, 25 years and an assumed 6% gross return. Calculated 20 August 2026. The $33,500 (0.25% charge against none) and $56,000 ($11,000 against $10,000 a year at 0.25%) comparisons use the same recurrence. Calculated 13 October 2026.